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At first you may only be making a small amount of money passively, and you may even want to re-invest that money so that it compounds and grows faster. But with a few time, its potential to make enough passive income that you could quit your job or retire early.
In some cases youll need to put in some effort up front, but then it wont require as much effort in the future when youre making the money.
Exactly what qualifies as passive income is up for discussion. Most lists which youll find online will include things such as blogging, writing e-books, or creating your own course. Im not including those thoughts in this informative article because, in my opinion, all of them require too much effort to be considered as passive.
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Blogging will always require on-going work, either by yourself or from other people which youre paying. Selling ebooks or classes will require on-going customer support, and youll need a consistent traffic supply in order to continue to make sales. It is possible and there are individuals who have been able to get it done passively, but they make up a small percentage of people who actually set out to get it done.
Ive been blogging fulltime for ten decades and Ive sold ebooks and courses in the past. Theyre great ways to earn money, I simply dont consider them to be more passive, in most cases. .
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Just about any business can be a source of passive income if youre paying others to run the business. This is true with both online and traditional businesses. That opens up even more chances than that which will be recorded here.
Now lets have a peek at a few of the best ways to produce passive income. Some of them are investments which will require some money to begin with. Other folks wont need any money to get started. In case you dont have the money to invest now, try starting with the methods that dont need any money, and then use that money you make to invest. .
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Your first financial priority should be to build up an emergency fund that can cover all of your living expenses for a few months. But dont put this money is a checking or savings account at a local bank which pays you a terrible interest rate. You can open a high yield savings account or money market account with an online bank that will earn a much greater return for you.
My wife and I maintain our emergency fund in a money market account with CIT Bank. At the moment their explanation (October 2018) CIT money market accounts are earning 1.85% APY and CIT savings accounts are earning 1.55% APY. Thats 22x the national average! Opening an account with CIT is quick and simple, and can be done online. .
Some companies consistently pay dividends for their shareholders. As a trader, you can re-invest the dividends to buy more shares of this stock, or take the dividends in cash. Reinvesting anonymous will let you own more stocks, which contributes to greater dividends in the future (ideally).
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The companies that consistently pay dividends tend to be large companies with a long track record of success. Because of this, these investments tend to be considered less risky than the stock market in general.
Dividend stocks can be a great investment whether or not you want to reinvest all the dividends on hold on to this stock for a long time, or use the income produced through the dividends.
For far more detail on the subject read Investing in Dividend Stocks in Investopedia. To get a list of those stocks, see this collection from Dividend.com and this collection from DividendValueBuilder.com.
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Peer-to-peer lending (or P2P) is becoming extremely popular in recent years. Borrowers and lenders can be paired up through a site or marketplace. Instead of going to a bank, the borrower receives a loan by an investor.
In some cases the borrower may not be able to qualify for a loan through a traditional bank. And in many cases the borrower gets a much better interest rate than they could receive from a bank. As an investor, you can earn a great return as well.